Food Stamps Aren’t Stamps Anymore
For most of the 20th century, the terms “food stamps,” “welfare,” and “federal aid” were used to refer to programs designed to help families meet their most basic needs like groceries, diapers, and school supplies. So unless you were a grocer or a big-box retailer, you probably wouldn’t have too many customers hoping to use food stamps or welfare coupons at your location. However, government aid programs have undergone major changes over the last 20 years, and customers who receive certain government benefits can now use some of their funds for any type of purchase—meaning you may now be able to make sales to these customers. And thanks to recent nationwide overhauls, you can accept these payments with ease by using your existing credit card processing equipment.
EBT (Electronic Benefits Transfer) is the present-day system by which federal aid recipients pay for goods and services at retail locations. It was created in the late ’90s to replace the longstanding system of physical food stamps and payment vouchers with a more efficient electronic model. Today, aid recipients use magnetic swipe cards which function in a way similar to PIN debit cards. The process is simple: the customer just swipes the card through the terminal and enters a secret PIN. Once the transaction is authorized by the EBT network, you receive the customer’s payment just as you receive your other card payments. It’s simple, discreet, and most importantly, it isn’t subject to the interchange fees that are attached to conventional credit and debit cards.
Alphabet soup: SNAP vs. TANF
There are numerous different federal and state welfare programs, and each program has its own restrictions on how recipients can spend their money. It’s important to understand these distinctions so that you can make an educated decision about whether to accept EBT payments.
The largest nutrition assistance program that uses the EBT network is SNAP (Supplemental Nutrition Assistance Program), which is a direct replacement of the old federal food stamp system. SNAP payments are strictly limited to food items: meat, dairy, vegetables, processed foods, drinks, etc. If your business does not derive a significant portion of its revenue from the sale of these goods, you likely will not benefit from offering SNAP acceptance.
TANF (Temporary Assistance for Needy Families), on the other hand, has very few restrictions on the way its funds can be spent. TANF and similar programs are often referred to as “cash assistance” programs, meaning that recipients can spend it just as they would cash. There are some restrictions on a state-by-state basis—typically with regard to items like alcohol, tobacco, gambling, or adult entertainment—but overall, most retail goods are eligible to be purchased with TANF money. State-issued cash assistance programs are also often referred to as TANF and generally operate under these same guidelines.
Recipients of cash assistance can also withdraw the funds in their EBT accounts in the form of actual cash via ATMs, although there are limits and withdrawal fees associated with this. For this reason, they may prefer to collect cash back at the point of sale, which is also allowable under most TANF programs. You may benefit from providing cash back to TANF recipients, as they could be more likely to frequent your location in order to make use of this option.
What does it cost to accept EBT payments?
Although it’s illegal to charge per-transaction fees on EBT payments in the same way that interchange is charged, processors are allowed to charge merchants a reasonable fee for the general ability to process EBT transactions. These costs will vary by processor, but they should not be charged on a per-transaction basis and in most cases will just amount to a small monthly or annual fee.
EBT can be processed through standard point-of-sale equipment, so you shouldn’t have to purchase any equipment that is solely dedicated to EBT acceptance. However, you may need to upgrade your existing equipment to ensure that it can handle both standard and EBT card payments. As always, you are advised to purchase your equipment up front if possible and to avoid entering into a long-term, non-cancellable equipment lease.
Accepting EBT can open up a whole new customer base for your business by enabling TANF recipients to spend their funds at your location. EBT requires no new equipment in most cases, and it comes without the pesky transaction fees that are attached to credit and debit cards. There will likely be a monthly or annual charge for the privilege of accepting EBT, and you should be sure to weigh this cost against your potential earnings on EBT sales. If you would like to add EBT acceptance, contact your provider or consult our list of top EBT processors.